IN CANADA

TAXES

CANADA REVENUE AGENCY (CRA)

CRA administers:•tax laws for the Government of Canada and for most provinces and territories

•various social and economic benefit and incentive programs delivered through the tax system

WHY PAY TAXES?

• Fund government programs and social services

• Help to redistribute wealth (i.e. charities, students, retirees, lower-income families, people with disabilities)

• Provide incentives to businesses

EXAMPLES OF BENEFITS, PROGRAMS, AND SOCIAL SERVICES

• Roads• Public utilities• Education• Health Care• Economic Development• Cultural Activities• Defense• Law Enforcement• Funding of research, foreign aid, social

development

TYPES OF TAXES

• Income tax – a tax on the income of a person, a corporation, or a trust

• User tax – a tax paid to use a facility or service (ie: toll road)

• Commodity tax – a tax on the consumption of products (ie: HST)

• Transfer tax – a tax on the value of property when it changes ownership

• Business transfer tax – a value added tax (tax added to a product as it moves through the stages of production and distribution)

LEVELS OF TAXATION

• Federal

• Provincial

• Municipal

WHERE DO OUR TAXES GO?

Federal Taxes

SOURCES OF TAX REVENUE

• Corporate income tax (14 cents)• Earnings by Crown corporations and revenues

from the sale of goods and service (10 cents)• Employment Insurance premiums (8 cents)• Non-resident withholding taxes, customs import

duties, energy taxes and excise taxes and duties on alcohol and tobacco (8 cents)• Personal income tax (48 cents)• Revenues from the GST/HST (12 cents)

http://www.fin.gc.ca/tax-impot/2010/html-eng.asp

TAXPAYER RESPONSIBILITIES

• paying taxes

• preparing and filing own tax return (income, deductions, credits) by the deadline

• accurately reporting what they earn and what they owe

THE UNDERGROUND ECONOMY

WHAT IS IT?• Income earned but not reported for tax purposes

• The sale of goods or services on which taxes have not been paid

THE UNDERGROUND ECONOMY

SOCIAL CONSEQUENCES• Honest businesses are put at a competitive disadvantage • Law-abiding companies lose business because consumers may

buy from illegal companies who do not charge taxes

• Honest tax-payers bear the tax load of those who cheat

• Essential government programs are put at risk (i.e. health care, social services)

• Individual consumers who buy from the underground economy can not go to the CRA for help if something goes wrong with what they bought

QUESTIONS

• Connect to http://www.cra-arc.gc.ca/gncy/lrt/ndrgrnd-eng.html and answer the following questions about the underground economy:1. What are some of the risks of dealing with someone

who is not operating legitimately?2. What does it mean to “evade taxes”? What are some

of the punishments if you evade your taxes?3. How can the average person be hurt by the

underground economy?4. Briefly describe the “Voluntary Disclosures Program”.